Whitman Company began operations on January 1, 2012, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2015. The following information is available for the years 2012–2014.

Instructions (Ignore all tax effects.)

(a) Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2015.

(b) Determine net income to be reported for 2012, 2013, and 2014, after giving effect to the change in accounting policy.

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Net Income Computed Using Average-Cost Method 2012 16,000 2013 18,000 2014 20,000 FIFO Method 19,000 21,000 25,000